Monday, 28 July 2014

Foreign Investment in India by SEBI registered Long term investors in Government dated Securities

Foreign investment in India by SEBI registered Long term investors in
Government dated Securities

Attention of Authorized Dealer Category-I (AD Category-I) banks is invited to Schedule 5 to the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) Regulations, 2000 notified vide Notification No. FEMA.20/2000-RB dated May 3, 2000, as amended from time to time, in terms of which SEBI registered Foreign Institutional Investors (FIIs), SEBI registered Qualified Foreign Investors (QFIs) and long term investors registered with SEBI may purchase, on repatriation basis Government securities and non-convertible debentures (NCDs) / bonds issued by an Indian company subject to such terms and conditions as mentioned therein and limits as prescribed for the same by RBI and SEBI from time to time.

2. Attention of AD Category-I banks is also invited to A.P. (DIR Series) Circular No.99 dated January 29, 2014 in terms of which the present limit for investments by FIIs, QFIs and long term investors in Government securities stands at USD 30 billion, out of which a sub-limit of USD 10 billion is available for investment by long term investors in Government dated securities.

3. On a review, it has been decided to enhance the investment limit in government securities available to FIIs/QFIs/FPIs by USD 5 billion by correspondingly reducing the amount available to long term investor from USD 10 billion to USD 5 billion within the overall limit of USD 30 billion. The incremental investment limit of USD 5 billion shall be required to be invested in government bonds with a minimum residual maturity of three years. Further, all future investment against the limit vacated when the current investment by an FII/QFI/FPI runs off either through sale or redemption shall also be required to be made in government bonds with a minimum residual maturity of three years. It is, however, clarified that there will be no lock-in period and FIIs/QFIs/FPIs shall be free to sell the securities (including that are presently held with less than three years of residual maturity) to the domestic investors.

4. The operational guidelines in this regard will be issued by SEBI.

5. All other existing conditions for investment in Government securities remain unchanged.

6. AD Category – I banks may bring the contents of this circular to the notice of their constituents and customers concerned.

7. The directions contained in this circular have been issued under sections 10(4) and 11(1) of the Foreign Exchange Management Act, 1999 (42 of 1999) and are without prejudice to permissions / approvals, if any, required under any other law.

Yours faithfully,

(B.P.Kanungo)
Principal Chief General Manager

Thursday, 17 July 2014

Flexible Structuring of Long Term Project Loans to Infrastructure and Core Industries

Flexible Structuring of Long Term Project Loans to
Infrastructure and Core Industries
During the last decade, commercial banks have become the primary source of long term debt financing to projects in infrastructure and core industries. Infrastructure and core industries projects are characterised by long gestation periods and large capital investments. The long maturities of such project loans consist of the initial construction period and the economic life of the asset /underlying concession period (usually 25-30 years). In order to ensure stress free repayment of such long gestation loans, their repayment tenor should bear some correspondence to the period when cash flows are generated by the asset.
2. Banks have been representing to us that they are unable to provide such long tenor financing owing to asset-liability mismatch issues. To overcome the asset liability mismatch, they invariably restrict their finance to a maximum period of 12-15 years. After factoring in the initial construction period and repayment moratorium, the repayment of the bank loan is compressed to a shorter period of 10-12 years (with resultant higher loan instalments), which not only strains the viability of the project, but also constrains the ability of promoters to generate fresh equity out of internal generation for further investments. It might also lead to levying higher user charges in the case of infrastructure projects in order to ensure that greater cash flows are generated to service the loans. As a result of these factors, some of the long term projects have been experiencing stress in servicing the project loan.
3. With a view to overcoming these problems, banks have requested that they may be allowed to fix longer amortisation period for loans to projects in infrastructure and core industries sectors, say 25 years, based on the economic life or concession period of the project, with periodic refinancing, say every 5 years. Banks have indicated that:
  1. this would ensure long term viability of infrastructure/core industries sector projects by smoothening the cash flow stress in initial years;
  2. they would be able to extend finance to such projects without getting adversely impacted by asset-liability management (ALM) issues;
  3. the need for restructuring (owing to initial stressed cash flows due to 10-12 year loan tenors normally fixed) would be minimised, allowing  banks to once again take up financing / refinancing of these project loans;
  4. they  could shed or take up exposures  at different stages of the life cycle of such projects depending on  bank’s single / group borrower or sectoral exposure limits;
  5. with reduction of project risk and option of refinancing, ratings of such projects would undergo upward revision allowing lower capital requirement for banks as also access to corporate bond markets to project promoters at any stage based on such refinancing; etc.
4. It has also been suggested by banks that, the long tenor loans to infrastructure/core industries projects, say 25 years, could be structured as under:
  1. The fundamental viability of the project would be established on the basis of all requisite financial and non-financial parameters, especially the acceptable level of interest coverage ratio (EBIDTA / Interest payout), indicating capacity to service the loan and ability to repay over the tenor of the loan;
  2. Allowing longer tenor amortisation of the loan (Amortisation Schedule), say 25 years (within the useful life / concession period of the project) with periodic refinancing (Refinancing Debt Facility) of balance debt, the tenor of which could be fixed at the time of each refinancing, within the overall amortisation period;
  3. This would mean that the bank, while assessing the viability of the project, would be allowed to accept the project as a viable project where the average debt service coverage ratio (DSCR) and other financial and non-financial parameters are acceptable over a longer amortisation period of say 25 years (Amortisation Schedule), but provide funding (Initial Debt Facility) for only, say, 5 years with refinancing of balance debt being allowed by existing or new banks (Refinancing Debt Facility) or even through bonds; and
  4. The refinancing (Refinancing Debt Facility) after each of these 5 years would be of the reduced amounts determined as per the Original Amortisation Schedule.
5. Against this backdrop, in the Union Budget 2014-15, presented on July 10, 2014, the Hon’ble Finance Minster announced that:
“131.  Long term financing for infrastructure has been a major constraint in encouraging larger private sector participation in this sector. On the asset side, banks will be encouraged to extend long term loans to infrastructure sector with flexible structuring to absorb potential adverse contingencies, sometimes known as the 5/25 structure. On the liability side, banks will be permitted to raise long term funds for lending to infrastructure sector with minimum regulatory pre-emption such as CRR, SLR and Priority Sector Lending (PSL).”
6. The issues have been examined by the Reserve Bank of India (RBI). It is clarified that RBI has not prescribed any ceiling or floor on repayment period of loans, except in the case of special regulatory treatment for asset classification on restructuring1. Paragraph 1.3 of Master Circular – Prudential Norms on Income Recognition, Asset Classification and Provisioning pertaining to Advances, urges banks to ensure that while granting loans and advances, realistic repayment schedules are fixed on the basis of cash flows with borrowers as it would go a long way to facilitate prompt repayment by the borrowers and thus improve the record of recovery in advances.  Further, in terms of circular  DBOD.No.BP.BC.144/21.04.048-2000 dated February 29, 2000 on ‘Income Recognition, Asset Classification, Provisioning and other related matters and Capital Adequacy Standards - Takeout Finance’, banks can refinance their existing infrastructure project loans by entering into take-out financing agreements with any financial institution (FI) on a pre-determined basis. If there is no pre-determined agreement, a standard account in the books of a bank can still be taken over by other banks/FIs, subject to guidelines on ‘Transfer of Borrowal Accounts from one Bank to Another’ issued vide circular DBOD.No.BP.BC-104/21.04.048/2011-12 dated May 10, 2012.
7. Further, in partial modification to the above-mentioned circular dated February 29, 2000, banks were advised, vide circular DBOD.BP.BC.No.98/21.04.132/2013-14 dated February 26, 2014 on ‘Framework for Revitalising Distressed Assets in the Economy - Refinancing of Project Loans, Sale of NPA and Other Regulatory Measures’, that if they refinance any existing infrastructure and other project loans by way of take-out financing, even without a pre-determined agreement with other banks / FIs, and fix a longer repayment period, the same would not be considered as restructuring if the following conditions are satisfied:
  1. Such loans should be ‘standard’ in the books of the existing banks, and should have not been restructured in the past;
  2. Such loans should be substantially taken over (more than 50% of the outstanding loan by value) from the existing financing banks/Financial institutions; and
  3. The repayment period should be fixed by taking into account the life cycle of the project and cash flows from the project.
8. In view of the above, RBI’s instructions do not come in the way of banks’ structuring long term project financing products, insofar as the prudential and regulatory framework is meticulously observed while structuring such products. However, as banks have certain misgivings that such refinancing of long term project loans may be construed as restructuring, and the estimated cash flows (balance debt in the form of bullet payment) at the end of each refinancing period  may not be allowed to be counted  in the appropriate maturity buckets for the purpose of ALM,  the RBI clarifies that it would not have any objection to banks’ financing of long term projects in infrastructure and core industries sector as suggested in paragraph 4 above, provided that:
  1. Only term loans to infrastructure projects, as defined under the Harmonised Master List of Infrastructure of RBI, and projects in core industries sector, included in the Index of Eight Core Industries (base: 2004-05) published by the Ministry of Commerce and Industry, Government of India, (viz., coal, crude oil, natural gas, petroleum refinery products, fertilisers, steel (Alloy + Non Alloy), cement and electricity - some of these sectors such as fertilisers, electricity generation, distribution and transmission, etc. are also included in the Harmonised Master List of Infrastructure sub-sectors) - will qualify for such refinancing;
  2. At the time of initial appraisal of such projects, banks may fix an  amortisation schedule (Original Amortisation Schedule) while ensuring that  the  cash flows from such projects and all necessary financial and non-financial parameters are robust even under stress scenarios;
  3. The tenor of the Amortisation Schedule should not be more than 80% (leaving a tail of 20%) of the initial concession period in case of infrastructure projects under public private partnership (PPP) model; or 80% of the initial economic life envisaged at the time of project appraisal for determining the user charges / tariff in case of non-PPP infrastructure projects; or 80% of the initial economic life envisaged at the time of project appraisal by Lenders Independent Engineer in the case of other core industries projects;
  4. The bank offering the Initial Debt Facility may sanction the loan for a medium term, say 5 to 7 years. This is to take care of initial construction period and also cover the period at least up to the date of commencement of commercial operations (DCCO) and revenue ramp up. The repayment(s) at the end of this period (equal in present value to the remaining residual payments corresponding to the Original Amortisation Schedule) could be structured as a bullet repayment, with the intent specified up front that it will be refinanced. That repayment may be taken up by the same lender or a set of new lenders, or combination of both, or by issue of corporate bond, as Refinancing Debt Facility, and such refinancing may repeat till the end of the Amortisation Schedule;
  5. The repayment schedules of Initial Debt Facility should normally correspond to the Original Amortisation Schedule, unless there is an extension of DCCO. In that case, in terms of extant instructions contained in ‘Master Circular – Prudential Norms on Income Recognition, Asset Classification and Provisioning pertaining to Advances’ dated July 1, 2014, mere extension of DCCO would not be considered as restructuring subject to certain conditions, if the revised DCCO falls within the period of two years and one year from the original DCCO for infrastructure and non-infrastructure projects respectively. In such cases the consequential shift in repayment schedule by equal or shorter duration (including the start date and end date of revised repayment schedule) than the extension of DCCO would also not be considered as restructuring provided all other terms and conditions of the loan remain unchanged or are enhanced to compensate for the delay and the entire project debt amortisation is scheduled within 85%2 of the initial economic life of the project as prescribed in paragraph 8 (iii) above;
  6. The Amortisation Schedule of a project loan may be modified once during the course of the loan (after DCCO) based on the actual performance of the project in comparison to the assumptions made during the financial closure without being treated as ‘restructuring’ provided:

    a) The loan is a standard loan as on the date of change of Amortisation Schedule;

    b) Net present value of the loan remains the same before and after the change in Amortisation Schedule; and

    c) The entire outstanding debt amortisation is scheduled within 85%3 of the economic life of the project as prescribed in paragraph 8 (iii) above;
  1. If the Initial Debt Facility or Refinancing Debt Facility becomes NPA at any stage, further refinancing should stop and the bank which holds the loan when it becomes NPA, would be required to recognise the loan as such and make necessary provisions as required under the extant regulations. Once the account comes out of NPA status, it will be eligible for refinancing in terms of these instructions;
  2. Banks may determine the pricing of the loans at each stage of sanction of the Initial Debt Facility or Refinancing Debt Facility, commensurate with the risk at each phase of the loan, and such pricing should not be below the Base Rate of the bank;
  3. Banks should secure their interest by way of proper documentation and security creation, etc.;
  4. Banks will be initially allowed to count the cash flows from periodic amortisations of loans as also the bullet repayment of the outstanding debt at the end of each refinancing period for their asset-liability management; however, with experience gained, banks will be required in due course to conduct behavioural studies of cash flows in such amortisation of loans and plot them accordingly in ALM statements;
  5. Banks should recognise from a risk management perspective that there will be a probability that the loan will not be refinanced by other banks, and should take this into account when estimating liquidity needs as well as stress scenarios. Further, unless the part or full refinancing by other banks is clearly identified, the cash flows from such refinancing should not be taken into account for computing liquidity ratios. Similarly, once committed, the refinancing bank should take into account such cash flows for computing their liquidity ratios; and
  6. Banks should have a Board approved policy for such financing.
9. The above structure will apply to new loans to infrastructure projects and core industries projects sanctioned after the date of this circular. Further, our instructions on ‘take-out finance’ (circular dated February 29, 2000) and  ‘transfer of borrowal accounts’ (circular dated May 10, 2012) will cease to be applicable on any loan to infrastructure and core industries projects sanctioned under these instructions. RBI will review the instructions at periodic intervals.

Financing of Infrastructure and Affordable Housing

Issue of Long Term Bonds by Banks

Issue of Long Term Bonds by Banks – Financing of Infrastructure and Affordable Housing
In the Union Budget 2014-15, presented on July 10, 2014, the Hon’ble Finance Minister announced that:
“131. Long term financing for infrastructure has been a major constraint in encouraging larger private sector participation in this sector. On the asset side, banks will be encouraged to extend long term loans to infrastructure sector with flexible structuring to absorb potential adverse contingencies, sometimes known as the 5/25 structure. On the liability side, banks will be permitted to raise long term funds for lending to infrastructure sector with minimum regulatory pre-emption such as CRR, SLR and Priority Sector Lending (PSL).”
2. While flexible structuring for long term loans to infrastructure sector on the asset side of the banks’ balance sheets is dealt with separately vide our circular DBOD.BP.BC.No.24 /21.04.132/2014-15 dated July 15, 2014, this circular addresses the liability side of the banks’ balance sheets; raising long term funds for lending to key infrastructure.
3. Apart from what is technically defined as infrastructure, affordable housing is another segment of the economy which both requires long term funding and is of critical importance. Government has stressed the importance of availability of cheap credit to make housing affordable for the Economically Weaker Sections (EWS), Lower Income Group (LIG) and Medium Income Group (MIG) segments of the population. Accordingly, the Reserve Bank intends to ease the way for banks to raise long term resources to finance their long term loans to infrastructure as well as affordable housing. This will help promote both growth and stability, as well as improve the supply side.
4. In this context, a reference is invited to our circular DBOD.No.BP.BC.90/21.01.002/2003-04 dated June 11, 2004 on ‘Issue of Long-term Bonds by Banks’, whereby banks were allowed to issue long term bonds (other than which qualify as Tier II capital) with a minimum maturity of 5 years to the extent of their exposure of residual maturity of more than 5 years to the infrastructure sector, in order to facilitate banks to raise long-term resources for funding their long-term commitments and concurrently to assist banks in reducing asset-liability mismatches in the longer term maturities.
5. While banks have been raising resources in a significant way by way of issuance of Tier II capital bonds, it is, however, observed that issuance of long term bonds for funding loans to infrastructure sector, has not picked up at all, even though both are similar in terms of minimum tenor and application of reserve requirements.
6. In view of the above observations and in order to ensure adequate credit flow to infrastructure sector as also towards the affordable housing needs of the country by encouraging banks to optimally utilize the long-term financing avenues already available to them to finance their lending to these sectors, the prudential guidelines on this issue have been reviewed with a view to minimize certain regulatory pre-emptions. Accordingly, instructions given in the above-mentioned circular dated June 11, 2004 have been modified and the revised guidelines for issue of long-term bonds are given in the Annex to this circular.

Format for Furnishing of Credit Information to Credit Information Companies and other Regulatory Measures

Format for Furnishing of Credit Information to Credit Information Companies and other Regulatory Measures
A Committee to Recommend Data Format for Furnishing of Credit Information to Credit Information Companies (Chairman: Shri Aditya Puri) was constituted by the Reserve Bank of India (RBI). The Report of the Committee was placed on RBI’s website on March 22, 2014 inviting comments on the recommendations of the Committee. A copy of the Report of the Committee is attached for reference.

 On examination of the recommendations of the Committee and the comments/suggestions received, it has been decided to implement the following recommendations with modifications, wherever appropriate:
  1. Creating Awareness about Credit Information Report (CIR): With a view to appreciating the benefits accruing to Regional Rural Banks (RRBs)/State Cooperative Banks (StCBs) and District Central Cooperative Banks (CCBs)  arising out of better screening of loan applicants and usage of CIR in credit appraisal, Credit Information Companies (CIC) should regularly hold workshops for RRBs/StCBs/CCBs. [Recommendation 8.7]
  2. Credit Information Reports (CIRs) / Credit Bureau Usage in all Lending Decisions and Account Opening: RRBs   should include in their credit appraisal processes/loan policies, suitable provisions for obtaining CIRs from one or more CICs so that the credit decisions are based on information available in the system. In this context, as commercial borrowers’ data is not adequately populated with the CICs, to start with, RRBs/StCBs/CCBs may institute board approved policies for credit bureau usage in all lending decisions and account opening to retail borrowers/consumer borrower segment. [Recommendation 8.9]
  3. Populating Commercial Data Records in Databases of all CICs: Presently, the databases of CICs are not adequately populated with commercial borrowers’ data. A roadmap in regard to CICs populating their databases in respect to corporate borrowers is required to be laid out. For this purpose, RRBs/StCBs/CCBs are advised to report data in respect of their corporate borrowers to the CICs in a timely manner with immediate effect and CICs should populate their databases with commercial data records within six months. Therefore, after a period of six months, RRBs/StCBs/CCBs should also start using data available with the CICs in respect of commercial / corporate borrowers, under a Board approved policy. [Recommendation 8.8]
  4. Standardisation of Data Format: With a view to streamlining the process of data submission by RRBs/StCBs/CCBs to CICs, it has been decided to standardise the formats for data submission by the RRBs/StCBs/CCBs to the CICs. The data format as per Annex I should be taken as the base for standardisation of data format for consumer and commercial borrowers. In respect of Micro Finance Institution (MFI) segment, data format as per Annex II should be taken as the base for standardisation. These formats should be put in use by the RRBs/StCBs/CCBs for reporting to CICs with immediate effect. The data format would be a non-proprietary reporting format and henceforth would be known as “Uniform Credit Reporting Format”. The segment viz. consumer, commercial, and MFI will be denoted appropriately in parentheses, for example, “Uniform Credit Reporting Format (Consumer)”. These should be uniformly adopted by the RRBs/StCBs/CCBs and CICs. [Recommendation 8.10 (a)]
  5. Technical Working Group: It has been decided by our Department of Banking Operations and Development to constitute a Technical Working Group comprising of representatives from Scheduled Commercial Banks (a member each from a Public Sector Bank, a Private Sector Bank and a Foreign Bank), Urban Cooperative Banks, Regional Rural Banks (RRBs), All India Notified Financial Institutions, CICs, NBFCs, HFCs, IBA and MFIN to institutionalize a continuing mechanism for reviewing and making changes where necessary to the data formats. This Working Group should review the data formats periodically, say once a year, and suggest modifications to the same. It would frame rules on all data fields for various data formats, viz. consumer, commercial and MFI. The data formats after finalisation by the Group will be submitted to RBI for approval. In order to implement the recommendations relating to the Technical Working Group, CIBIL will act as the convenor of the Group and take the lead to operationalize the recommendation. To start with, the Working Group may take up, on a priority basis, changes in the commercial borrower segment, where there is an urgent need to capture data required for sharing of information among member banks/FIs under consortium/multiple banking arrangements and to aid in implementation of the instructions at paragraph 2 (iii) above. The Working Group should also incorporate the additional fields as detailed in Annex III. [Recommendations 8.10 (b) and 8.11]
  6. Rectification of Rejected Data: CICs should share with RRBs/StCBs/CCBs the logic and validation processes involved in data acceptance so that instances of data rejection can be minimised. The reasons for rejection need to be parameterised and circulated among the RRBs/StCBs/CCBs concerned. Rejection reports should be made simple and understandable so that they can be used for fixing reporting and data level issues. RRBs/StCBs/CCBs should rectify the rejected data and upload the same with the CICs within seven days of receipt of such rejection report. [Recommendation 8.15]
  7. Data Quality Index: A common Data Quality Index would assist RRBs/StCBs/CCBs in determining the gaps in their data and also move towards improving their performance over a period of time. In addition, they would also be able to rank their own performance against that of their peers and identify their relative position. Annex 6 of the Report contains a draft Data Quality Index as agreed upon by all the CICs giving different parameters for assessing the data submitted by the RRBs/StCBs/CCBs. CICs and RRBs/StCBs/CCBs  may adopt this Data Quality Index for assessing the quality of data submissions and make efforts towards improving data quality and minimising data rejections, within a time period of six months. [Recommendation 8.16]
  8. Credit Score: To facilitate the understanding and interpretation of credit scores in an easy and consistent manner, it is advised that the CIBIL method of calibrating credit score from 300 to 900 be adopted by the other CICs also, within a time period of six months, so that they have a common classification of Credit Scores. [Recommendation 8.17]
  9. Standardising Format of Credit Information Report (CIR): It is not considered necessary to standardise the format of the CIR as such differentiation is essential to promoting competition in the market. However, CICs should standardise the CIR terminology and also have some mandatory key fields. This would provide some comparability for the users between CIRs received from two or more CICs. The detailed aspects of a standardised CIR are furnished in Annex IV. [Recommendation 8.18(a)]
  10. Best Practices for RRBs/StCBs/CCBs: Every RRBs/StCBs/CCBs should take into account the best practices as detailed in Annex V while formulating or reviewing the policy and procedure under the Credit Information Companies (Regulation) Act, 2005 (CICRA) with the approval of their Board of Directors. [Recommendation 8.25]
  11. Best Practices for Credit Information Companies: CICs should also take into account best practices as detailed in Annex VI and put in place a system for consumer complaint redressal with the approval of their Board of Directors. Such policy may be displayed on their websites. [Recommendation 8.26]

Issue/Transfer of Shares or Convertible Debentures - Revised pricing guidelines


Foreign Direct Investment (FDI) in India - 
Issue/Transfer of Shares or Convertible Debentures 
- Revised pricing guidelines


Regulation 9 of the Principal Regulations read with A.P. (DIR Series) Circular No. 86 dated January 9, 2014 in terms of which optionality clauses have been allowed in equity shares and compulsorily and mandatorily convertible preference shares/debentures to be issued to a person resident outside India under the Foreign Direct Investment (FDI) scheme subject to conditions mentioned therein.

3. The extant pricing guidelines in respect of transfer/issue of shares and for exit from investment in equity shares with or without optionality clauses of listed/unlisted Indian companies have since been reviewed so as to provide greater freedom and flexibility to the parties concerned under the FDI framework. The new pricing guidelines shall be as under:
(i) In case of listed companies
(a) The issue and transfer of shares including compulsorily convertible preference shares and compulsorily convertible debentures shall be as per the SEBI guidelines;
(b) The pricing guidelines for FDI instruments with optionality clauses shall continue to be in accordance with A.P. (DIR Series) Circular No. 86 dated January 9, 2014, i.e., the non-resident investor shall be eligible to exit at the market price prevailing on the recognised stock exchanges subject to lock-in period as stipulated, without any assured return.
(ii) In case of unlisted companies
The issue and transfer of shares including compulsorily convertible preference shares and compulsorily convertible debentures with or without optionality clauses shall be at a price worked out as per any internationally accepted pricing methodology on arm’s length basis. Thus, the guiding principle will be that the non-resident investor is not guaranteed any assured exit price at the time of making such investment/agreement and shall exit at a fair price computed as above at the time of exit subject to lock-in period requirement as applicable in terms of A.P. (DIR Series) Circular No. 86 dated January 9, 2014.


Partly paid-up equity and warrants as FDI Compliant Instruments

Partly paid-up equity and warrants as FDI Compliant Instruments

The Reserve Bank of India has issued a (A.P. DIR Series) Circular No. 3 dated 14.07.2014 with respect to the regulations made there under in regard with Foreign Exchange Management (Transfer or issue of security by a person resident outside India) Regulations, 2000 in terms of which only equity shares and compulsorily convertible preference shares and debentures were recognized as Foreign Direct Investment Compliant instruments and later it was also extended to the equity shares or compulsory and mandatory convertible preference shares or debentures containing an optional clause attached to it had also been recognized as FDI compliant instruments, now the policy has been reviewed and the it has been further extended to the following instruments which is as under.
Partly paid-up equity shares and warrants issued by an Indian Company in accordance with the relevant provisions of the Companies Act, 2013 and the SEBI Guidelines, as applicable shall be eligible instruments for the purpose of FDI and foreign portfolio investment by Foreign Institutional Investors and other registered foreign portfolio investors subject to the compliance with the FDI norms.
The Circular containing the above mentioned details can also be viewed below.